The annual Forbes list of wealthiest Americans has landed just in time to throw some extra fuel on a hot political debate over “the rich” and whether their taxes should go up. The top 400 on this “rich list,” led by Microsoft founder Bill Gates and investor Warren Buffett, saw their net worth rise 12 percent in the past year (the 12 months ended on Aug. 26). All 400 had net worth of at least $1.05 billion, and their combined wealth reached $1.53 trillion, Forbes magazine reported as it released the list Wednesday. For comparison, Americans overall have also seen their net worth rise, on average, but with a percentage gain somewhere in the single digits, judging by data tracked by the Federal Reserve.
The “rich get richer” trend won’t necessarily come as a surprise, but it does come as the nation is focusing on a gauntlet thrown down earlier this week by President Obama, as he outlined a proposal for reducing federal deficits. “I will veto any bill that changes … Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share,” Mr. Obama said. His plan calls for raising an extra $1.5 trillion in tax revenue during the next decade from households earning more than $250,000 in income. Obama mentioned Mr. Buffett as a supporter of such a tax hike. Much of the Nebraska billionaire’s income is taxable at the low rate levied on long-term capital gains, leading Obama to say that “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.” Obama’s support for such a tax change is not new, nor is the response of Republican opponents. They have blasted Obama and other Democrats for engaging in “class warfare” that seeks to pit the majority of voters against their richest fellow citizens. House Speaker John Boehner called Obama’s deficit-reduction proposal “a $1.5 trillion tax hike on American job creators,” and said it amounted to a “campaign document” rather than a sound fiscal plan. Both parties appear moving increasingly into campaign mode as the 2012 elections come into closer view. Political analysts say Obama is sounding more passionate, and more willing to fight against the firm no-tax-hike line that Republicans have laid down in the deficit debate. A bipartisan “supercommittee” of a dozen lawmakers in Congress has until late November to come up with a plan to reduce future deficits, either through spending cuts alone or with some increased tax revenues added in. The 12 percent gain in net worth for those on the Forbes 400 list may sound surprising, given all the recent weakness in the stock market. But thanks to gains late last year, the Dow Jones Industrial Average rose by nearly that much during the 12-month period tracked by the magazine. How have average Americans fared during that time? The answers depend on the circumstances of individuals and families, but Federal Reserve data show overall American wealth to have risen by about $4.4 trillion between the second quarter of 2010 and the second quarter of this year. That’s about an 8 percent gain, fueled largely by changes in financial assets. (Home prices have fallen during that time, as has household debt.) The Fed data do not allow an exact comparison with the time period in the Forbes report, but by looking at the performance of the stock and housing markets during the August-to-August period, it seems likely that overall American net worth rose by less than 8 percent. But for millions of middle- or lower-income families, their home is a bigger part of their net worth than are financial assets. Meanwhile, ownership of such assets is concentrated in the hands of the wealthiest 20 percent of Americans. For these reasons, any gains in net worth for the typical US family were probably very modest. And according to recently released Census Bureau numbers, the number of Americans living in poverty rose in 2010.
In delivering his deficit plan Monday, Obama rejected the view that his plan amounts to “class warfare.”
“Nobody wants to punish success in America,” he said. “This is the land of opportunity. That’s great. All I’m saying is that those who have done well, including me, should pay our fair share in taxes to contribute to the nation that made our success possible.” The stage appears set for tax policy to be a major election issue, as Obama spars with Republicans over what the “fair share” for the rich is, and whether tax hikes will hurt economic growth. Many economists on the left say it’s ridiculous to equate “rich” with “job creator.” Many people with high net worth are not actively creating jobs, they say. And it’s not clear that a slightly higher tax rate would have a meaningful impact on job creation. On the right, policy experts say many of the people who would be affected by Obama’s proposed tax changes are heads of small businesses, and that job creation would be affected. Of the 400 people on the Forbes list, many are entrepreneurs. The magazine story accompanying the 400 list latched onto the “job creator” view. “These entrepreneurs are using technology to unleash power and make fortunes, and it is these folks who will likely help jump-start the American economy again,” the article said. Whoever wins the policy fight, taxing the ultra-rich, by itself, will not solve America’s fiscal problems. If the entire $1.53 trillion net worth of the Forbes 400 were suddenly taxed away, that would roughly cover this year’s deficit alone.